Sugar tax: 10 reasons why the job losses argument doesn’t stick

Written by Amy Green

Amid job losses claims, experts speculate why the levy may not result in job cuts.

Soda can. Credit: Jannes Pockele/Flickr

The beverage industry claims that the proposed tax on sugary drinks will result in massive job losses. Last year, the Beverage Association of South Africa (BevSA) claimed up to 70 000 jobs were at risk. This week, they told Health-e News that, since the tax has been essentially halved, they estimate that there will be around 24 000 job losses. We spoke to experts to gauge whether there is any reason for workers to panic. Until the tax is actually in place, all envisioned impacts are mere speculation but here are 10 reasons why jobs may not be in jeopardy – from the sugar tax at least.

  1. Tax halved

Last year Treasury proposed a tax of 20 percent on a can of Coke. But in February it was effectively halved when Treasury proposed that the first 4g of sugar per 100ml be exempt from tax – making the tax on a can of Coke about 11 percent. Before the revision Treasury estimated that around 5000 jobs could at stake, if the industry fails to reformulate. Congress of Trade Unions’ (Cosatu) Mathew Parks said, since the  tax cut, job loss expectations have dropped to as low as 3000. But he said government and business could find ways to prevent even these job losses.

  1. Reformulation

By exempting the first 4g of sugar per 100ml, Treasury has provide an incentive for the industry to reformulate their drinks to reduce sugar. Treasury’s Deputy Director General Ismail Momoniat said substantive reformulation would mean there were no job losses. BevSA’s general manager Tshepo Marumule said that the industry plans to implement programmes to “drive a 15 percent sugar content reduction by 2018”. Products like Coca-Cola’s Life, a mixture of sugar and the natural sweetener stevia, have already hit South African shelves. More of these could mitigate against the number of jobs lost in the beverage production industry itself – as consumers could switch to lower sugar products instead of giving up sugary drinks completely.

  1. Export more sugar

The concerns of small emerging black sugar farmers in Mpumalanga and KwaZulu-Natal have been raised by labour unions. Cosatu’s Parks said while big farmers can “take a knock”, the same can’t be said of emerging farmers. He said the government should facilitate wider access to international markets and reduce the amount of sugar being imported to increase local demand. Plans are already underway: South African sugar producer Tongaat Hulett said in their most recent annual report that they plan to expand their exports, particularly in the European Union.

  1. Use sugar for biofuel

Cosatu has proposed that the Department of Trade and Industry assist sugar farmers to produce sugar for biofuel such as ethanol.

  1. Switch crops

Member of Parliament, and former Tourism Minister, Derek Hanekom said that, in many instances, small sugar farmers could switch to cultivating different crops such as bananas or pineapples if the demand for sugar drops. Parks said government should assist farmers in making such transitions.

  1. Supermarkets buy from small farms

Parks said the onus is not only on the beverage industry to ensure jobs aren’t lost. Local supermarkets should be encouraged to preferentially buy from small local businesses. Creative ways should be found to increase small farmers’ competitiveness in this market, he said.

  1. Informal traders

Sugar sweetened beverages. Credit: Yehuda Cohen/Flickr

BevSA has said the biggest economic impact would be on informal traders who make 17 percent of their revenue and 30 percent of their profit margin on sugary drinks. But the industry has already announced plans to reformulate and to extend its sugar-free products. Professor Karen Hofman from the University of the Witwatersrand’s School of Public Health said that it is very likely that other products like bottled water and lower-sugar or sugar-free products will be able to compensate for decreased sales in informal outlets, as was the case in Mexico after it introduced a sugary drinks tax.

  1. International examples

Hofman said that international research on the impact of sugar taxes in other countries and cities has shown there have not been any significant job losses. “There is no jurisdiction in the entire globe where it has been proved there were job losses as a result of the tax after two years,” she said. A February study in the journal Health Affairs found that after Mexico introduced a similar tax in 2014 no jobs have been lost as a result.

  1. Healthier industries

Momoniat said taxes are a good way to get people discussing important issues like health and wellness. “A tax concentrates minds on an issue. It can make you aware of just how much sugar is in your favourite soft drink and make you think twice about consuming it,” he said. According to him, the tax is only one way the government plans to fight obesity but it is a strong motivator and talking point around which to create awareness. Other industries centred around health promotion and wellness could experience a boom as a result of this increased awareness and create jobs in those sectors, he said.

  1. Cutting jobs any way

Food and Allied Workers Union general secretary Katishi Masemola said that industry’s “alarmingly high” job losses claims are “far-fetched”. “Industry must not rush and cut jobs and then blame it on the sugar tax instead of finding a solution,” he said. Beverage industries have been accused of using sugar taxes as a scapegoat when they have cut jobs for other reasons including technological advancements that replace human labour. Momoniat said it was “important that trade unions monitor that employers are not doing so”.

Seventy percent of women and 30 percent of men are overweight or obese in the country “and something clearly needs to be done”, according to Masemola. “But we want both: We want healthy South Africans and we want jobs to be kept.” – Health-e News.

About the author

Amy Green